Scotland has outperformed every other European country when it comes to investment returns in the leased hotel sector, according to research from Scottish Development International and IPD.
Scottish leased hotel returns are ranked second out of nine European counties, coming second only to the rest of the UK as a whole.
This new research is the first of its kind to look at the property investor return performance of leased Scottish hotels, primarily in the budget market. The research will be conducted annually and will uncover the characteristics and trends of these hotels over time. Its main aim is to provide insight for real estate investors to consider hotels in Scotland as a mainstream investment within their portfolio.
Over three years, between 2009 and 2011, Scottish leased hotels produced total returns of 6.9 per cent year-on-year, compared to Germany which achieved 4.4 per cent and the rest of the UK with 9.5 per cent, and outperforming Austria, Finland, France, Norway and Portugal.
During 2011, hotels as a real estate asset class demonstrated total returns growth, from 9.2 per cent in 2010 to 9.5 per cent in 2011. Other real estate sectors significantly slowed down in the same time period, with total returns for retail and offices falling from 14.7 per cent year-on-year to six per cent year-on-year for retail, and from nine per cent to 1.4 per cent for office.
Kenneth Clark, head of tourism at Scottish Development International, says: “It’s fantastic that, while the global economy remained uncertain, the Scottish leased hotel sector significantly outperformed on investment returns compared to all other European countries, and other real estate asset classes in Scotland.
“Hotel leases have not been viewed seriously as property assets before now, primarily due to a lack of evidence on returns. However, this report uncovers the actual investor returns on a lease and should help in making informed investment location decisions."
The hotel sample included in this research included 434 real estate properties, valued at EUR9bn at the end of 2011. In Scotland, the sample was valued at GBP138m containing 16 properties at an average value of GBP8.6m.